Bank Polska Kasa Opieki Spółka Akcyjna Group Supplementary report on the audit of the consolidated financial statements Financial Year ended 31 December 2012 The supplementary report contains 13 pages The supplementary report on the audit of the consolidated financial statements for the financial year ended 31 December 2012 2013 KPMG Audyt spółka z ograniczoną odpowiedzialnością sp.k., a Polish limited partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved.
This document is a free translation of the Polish original. Terminology current in Anglo-Saxon countries has been used where practicable for the purposes of this translation in order to aid understanding. The binding Polish original should be referred to in matters of interpretation Contents 1. General 3 1.1 Identification of the Group 3 1.1.1 Name of the Group 3 1.1.2 Registered office of the Parent Company of the Group 3 1.1.3 Registration of the Parent Company in the National Court Register 3 1.1.4 Management of the Parent Company 3 1.2 Information about companies comprising the Group 3 1.2.1 Companies included in the consolidated financial statements 3 1.2.2 Entities excluded from consolidation 4 1.3 Auditor information 4 1.3.1 Key Certified Auditor information 4 1.3.2 Audit Firm information 4 1.4 Prior period consolidated financial statements 4 1.5 Audit scope and responsibilities 5 1.6 Information on audits of the financial statements of the consolidated companies 6 1.6.1 Parent Company 6 1.6.2 Other consolidated entities 7 2 Financial analysis of the Group 8 2.1 Summary analysis of the consolidated financial statements 8 2.1.1 Consolidated statement of financial position 8 2.1.2 Consolidated income statement 9 2.1.3 Consolidated statement of comprehensive income 10 2.2 Selected financial ratios 10 3 Detailed report 11 3.1 Accounting principles 11 3.2 Basis of preparation of the consolidated financial statements 11 3.3 Method of consolidation 11 3.4 Goodwill arising on consolidation 11 3.5 Consolidation of equity and calculation of non- controlling interest 11 3.6 Consolidation eliminations 12 3.7 Compliance with banking regulations 12 3.8 Notes to the consolidated financial statements 12 3.9 Report of the Management Board of the Parent Company on the Group s activities 13 2
1. General 1.1 Identification of the Group 1.1.1 Name of the Group Bank Polska Kasa Opieki Spółka Akcyjna Group (hereinafter, the Group ) is a member of UniCredit S.p.A. Group, registered in Rome. 1.1.2 Registered office of the Parent Company of the Group ul. Grzybowska 53/57 00-950 Warsaw Poland 1.1.3 Registration of the Parent Company in the National Court Register Registration court: District Court for Capital City Warsaw in Warsaw, XII Commercial Department of the National Court Register Date: 2 July 2001 Registration number: KRS0000014843 Share capital as at the balance sheet date: PLN 262,470,034 1.1.4 Management of the Parent Company The Management Board is responsible for management of the Parent Company. As at 31 December 2012, the Management Board of the Parent Company was comprised of the following members: Luigi Lovaglio Diego Biondo Marco Iannaccone Marian Ważyński Andrzej Kopyrski Grzegorz Piwowar President of the Management Board, CEO, Vice-President of the Management Board, Vice-President of the Management Board, Vice-President of the Management Board, Vice-President of the Management Board, Vice-President of the Management Board. 1.2 Information about companies comprising the Group 1.2.1 Companies included in the consolidated financial statements As at 31 December 2012, the following companies were consolidated by the Group: Parent Company: Bank Polska Kasa Opieki Spółka Akcyjna. Subsidiaries consolidated on the full consolidation basis: Public Joint Stock Company UniCredit Bank Luck, Ukraine, Centralny Dom Maklerski Pekao S.A. Warsaw, 3
Pekao Fundusz Kapitałowy Sp. z o.o. Warsaw, Pekao Leasing Sp. z o.o. Warsaw, Pekao Faktoring Sp. z o.o. Lublin, Pekao Pioneer Powszechne Towarzystwo Emerytalne S.A. Warsaw, Pekao Telecentrum Sp. z o.o. Warsaw, Centrum Kart S.A. Warsaw, Pekao Financial Services Sp. z o.o. Warsaw, Pekao Bank Hipoteczny S.A. Warsaw, Pekao Leasing Holding S.A. Warsaw, Centrum Bankowości Bezpośredniej Sp. z o.o. Cracow, Pekao Property S.A. Warsaw, Metropolis Sp. z o.o. Warsaw, Jana Kazimierza Development Sp. z o.o. Warsaw, Property Sp. z o.o. w likwidacji Warsaw, FPB-Media Sp. z o.o. Warsaw. 1.2.2 Entities excluded from consolidation As at 31 December 2012, there were no subsidiaries of the Group that were not consolidated. 1.3 Auditor information 1.3.1 Key Certified Auditor information Name and surname: Bogdan Dębicki Registration number: 796 1.3.2 Audit Firm information Name: odpowiedzialnością sp.k. Address of registered office: ul. Chłodna 51, 00-867 Warsaw Registration number: KRS 0000339379 Registration court: District Court for the Capital City of Warsaw in Warsaw, XII Commercial Department of the National Court Register NIP number: 527-26-15-362 odpowiedzialnością sp.k. is entered in the register of entities authorised to audit financial statements under number 3546, maintained by the National Council of Certified Auditors. 1.4 Prior period consolidated financial statements The consolidated financial statements for the financial year ended 31 December 2011 were audited by KPMG Audyt Sp. z o.o. and received an unqualified opinion. 4
The consolidated financial statements were approved at the General Meeting of the Parent Entity on 1 June 2012. The consolidated financial statements were submitted to the Registry Court on 14 June 2012 and were published in Monitor Polski B No. 2202 on 21 September 2012. 1.5 Audit scope and responsibilities This report was prepared for the General Meeting of Bank Polska Kasa Opieki Spółka Akcyjna with its registered office in Warsaw, ul. Grzybowska 53/57 and relates to the consolidated financial statements comprising: the consolidated statement of financial position as at 31 December 2012, the consolidated income statement and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended and notes to the consolidated financial statements, comprising of a summary of significant accounting policies and other explanatory information. The consolidated financial statements have been audited in accordance with the contract dated 27 July 2012, concluded on the basis of the resolution of the General Meeting dated 1 June 2012 on the appointment of the auditor. We conducted the audit in accordance with section 7 of the Accounting Act dated 29 September 1994 (Official Journal from 2009, No. 152, item 1223 with amendments) ( the Accounting Act ), National Standards on Auditing issued by the National Council of Certified Auditors and International Standards on Auditing. We audited the consolidated financial statements at the Parent Company s head office (and branches) during the period from 16 October 2012 to 14 March 2013. Management of the Parent Company is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with other applicable regulations and preparation of the report on the Group s activities. Our responsibility is to express an opinion and to prepare a supplementary report on the financial statements. The Management Board of the Parent Company submitted a statement, dated the same date as this report, as to the true and fair presentation of the accompanying consolidated financial statements, which confirmed that there were no undisclosed matters which could significantly influence the information presented in the consolidated financial statements. All required statements, explanations and information were provided to us by Management of the Group and all our requests for additional documents and information necessary for expressing our opinion and preparing the report have been fulfilled. The scope of the work planned and performed has not been limited in any way. The method and scope of our audit is detailed in working papers prepared by us and retained in the offices of the Audit Firm. The Key Certified Auditor and the Audit Firm fulfill the independence requirements from the companies included in the Group as described in Art. 56 points 3 and 4 of the Act on Certified 5
Auditors and Their Self-Government, Audit Firms and Public Oversight dated 7 May 2009 (Official Journal from 2009, No. 77, item 649). 1.6 Information on audits of the financial statements of the consolidated companies 1.6.1 Parent Company The separate financial statements of the Parent Company for the year ended 31 December 2012 were audited by odpowiedzialnością sp.k., certified auditor number 3546, and received an unqualified opinion. 6
1.6.2 Other consolidated entities Entity's name Authorised auditor Financial year end Type of auditor's opinion Public Joint Stock Company UniCredit Bank KPMG Ukraine Ltd. 31 December 2012 In progress Centralny Dom Maklerski Pekao S.A. Centrum Bankowości Bezpośredniej Sp. z o.o. Polinvest-Audit Sp. z o.o. Pekao Fundusz Kapitałowy Sp. z o.o. Pekao Leasing Sp. z o.o. Pekao Faktoring Sp. z o.o. Pekao Pioneer Powszechne Towarzystwo Emerytalne S.A. Centrum Kart S.A. Pekao Financial Services Sp. z o.o. Pekao Bank Hipoteczny S.A. Pekao Leasing Holding S.A. Pekao Property S.A. I.J.Konieccy biegli rewidenci s.c. Jana Kazimierza Development Sp. z o.o. I.J.Konieccy biegli rewidenci s.c. Metropolis Sp. z o.o. Property Sp. z o.o. w likwidacji FPB-Media Sp. z o.o. Pekao Telecentrum Sp. z o.o. Not subject to statutory audit requirement Not subject to statutory audit requirement Not subject to statutory audit requirement Not subject to statutory audit requirement 7
2 Financial analysis of the Group 2.1 Summary analysis of the consolidated financial statements 2.1.1 Consolidated statement of financial position ASSETS 31.12.2012 % of total 31.12.2011 % of total PLN '000 balance sheet PLN '000 balance sheet Cash and due from Central Bank 9 207 285 6.1 4 886 093 3.3 Debt securities eligible for rediscounting at Central Bank 159-100 - Loans and advances to banks 4 053 848 2.8 5 586 057 3.8 Financial assets held for trading 600 543 0.4 849 711 0.6 Derivative financial instruments (held for trading) 2 649 097 1.8 2 156 274 1.5 Other financial instruments at fair value through profit or loss - - - - Loans and advances to customers 95 081 492 63.0 92 816 389 63.3 Receivables from finance leases 2 717 931 1.8 2 862 760 2.0 Hedging instruments 367 890 0.2 408 906 0.3 Investments securities 28 735 442 19.0 29 119 637 19.9 - available for sale 25 887 659 17.1 25 324 803 17.3 - held to maturity 2 847 783 1.9 3 794 834 2.6 Assets held for sale 2 374 173 1.6 2 931 575 2.0 Investments in associates and subsidiaries 168 436 0.1 186 252 0.1 Intangible assets 669 387 0.4 703 355 0.5 Property, plant and equipment 1 670 544 1.1 1 772 940 1.2 Investment properties 33 221-63 928 - Income tax assets 828 566 0.5 889 952 0.6 Other assets 1 791 816 1.2 1 356 177 0.9 TOTAL ASSETS 150 949 830 100.0 146 590 106 100.0 EQUITY AND LIABILITIES 31.12.2012 % of total 31.12.2011 % of total PLN '000 balance sheet PLN '000 balance sheet Liabilities Amounts due to Central Bank - - 356 386 0.2 Amounts due to other banks 7 782 672 5.2 5 544 210 3.8 Financial liabilities held for trading 246 578 0.2 - - Derivative financial instruments (held for trading) 2 620 798 1.7 2 507 199 1.7 Amounts due to customers 107 992 608 71.5 108 436 964 74.0 Hedging instruments 1 226 781 0.8 1 738 549 1.2 Fair value hedge adjustments of hedged items due to interest rate risk 11 328 - (17 475) - Debt securities issued 4 758 736 3.2 3 043 919 2.1 Liabilities associated with assets held for sale 891 007 0.6 999 985 0.7 Income tax liabilities 82 634 0.1 198 997 0.1 Provisions 359 506 0.2 313 880 0.2 Other liabilities 1 518 400 1.0 2 110 562 1.4 TOTAL LIABILITIES 127 491 048 84.5 125 233 176 85.4 Equity Share capital 262 470 0.2 262 382 0.2 Other capital and reserves 20 023 141 13.3 18 035 191 12.3 Retained earnings and profit for the period 3 080 934 2.0 2 973 890 2.0 Equity attributable to equity holders of the Bank 23 366 545 15.4 21 271 463 14.5 Non - controlling interest 92 237 0.1 85 467 0.1 TOTAL EQUITY 23 458 782 15.5 21 356 930 14.6 TOTAL EQUITY AND LIABILITIES 150 949 830 100.0 146 590 106 100.0 8
2.1.2 Consolidated income statement 1.01.2012-31.12.2012 1.01.2012-31.12.2012 1.01.2012-31.12.2012 1.01.2011-31.12.2011 1.01.2011-31.12.2011 1.01.2011-31.12.2011 PLN '000 PLN '000 PLN '000 PLN '000 PLN '000 PLN '000 continuing operations discontinued operations total continuing operations discontinued operations total Interest income 8 125 179 190 878 8 316 057 7 179 154 225 066 7 404 220 Interest expense (3 446 849) (63 789) (3 510 638) (2 752 670) (93 692) (2 846 362) Net interest income 4 678 330 127 089 4 805 419 4 426 484 131 374 4 557 858 Fee and commission income 2 757 105 41 095 2 798 200 2 895 407 38 648 2 934 055 Fee and commission expense (526 257) (15 062) (541 319) (467 852) (17 309) (485 161) Net fee and commission income 2 230 848 26 033 2 256 881 2 427 555 21 339 2 448 894 Dividend income 8 759-8 759 10 352-10 352 Result on financial assets and liabilities held for trading 500 495 9 641 510 136 583 104 12 007 595 111 Result on fair value hedge accounting (35 751) - (35 751) (15 757) - (15 757) Gains (losses) on other financial instruments at fair value through profit or loss - - - (501) - (501) Gains (losses) on disposal of: 279 220 (21) 279 199 75 161 242 75 403 loans and other financial receivables 758-758 (320) 289 (31) available for sale financial assets and held to maturity investments 278 765 (21) 278 744 76 762 (47) 76 715 financial liabilities (303) - (303) (1 281) - (1 281) Operating income 7 661 901 162 742 7 824 643 7 506 398 164 962 7 671 360 Net impairment losses on financial assets and off-balance sheet commitments: (635 474) (33 980) (669 454) (533 407) (4 532) (537 939) loans and other financial receivables (608 642) (33 980) (642 622) (551 856) (4 532) (556 388) available for sale financial assets and held to maturity investments - - - - - - off-balance sheet commitments (26 832) - (26 832) 18 449-18 449 Net result on financial activity 7 026 427 128 762 7 155 189 6 972 991 160 430 7 133 421 Administrative expenses (3 182 674) (77 609) (3 260 283) (3 224 686) (76 896) (3 301 582) personnel expenses (1 867 494) (39 829) (1 907 323) (1 908 495) (37 659) (1 946 154) other administrative expenses (1 315 180) (37 780) (1 352 960) (1 316 191) (39 237) (1 355 428) Depreciation and amortization (362 378) (6 460) (368 838) (368 467) (9 026) (377 493) Net result on other provisions (15 327) - (15 327) (5 833) - (5 833) Net other operating income and expenses 94 193 200 94 393 74 901 (836) 74 065 Operating costs (3 466 186) (83 869) (3 550 055) (3 524 085) (86 758) (3 610 843) Gain on sale of discontinued operations - - - - - - Gains (losses) on associates and subsidiaries 52 866-52 866 69 968-69 968 Gains (losses) on disposal of property, plant and equipment, and intangible assets 22 261-22 261 400-400 Profit before income tax 3 635 368 44 893 3 680 261 3 519 274 73 672 3 592 946 Income tax expense (706 720) (8 288) (715 008) (667 884) (15 966) (683 850) Income tax on gain on sale of discontinued operations - - - - - - Net profit for the period 2 928 648 36 605 2 965 253 2 851 390 57 706 2 909 096 9
2.1.3 Consolidated statement of comprehensive income 1.01.2012-1.01.2011-31.12.2012 31.12.2011 PLN '000 PLN '000 Net profit 2 965 253 2 909 096 1.Attributable to equity holders of the Bank 2 955 702 2 899 414 2.Attributable to non-controlling interest 9 551 9 682 Other comprehensive income Foreign currency translation differences (46 619) 58 647 Change in fair value of available-for-sale financial assets 761 876 (58 841) Change in fair value of cash flow hedges (40 119) (49 270) Income tax expenses on other comprehensive income (127 650) 9 187 Other comprehensive income (net) 547 488 (40 277) Total comprehensive income 3 512 741 2 868 819 Attributable to equity holders of the Bank 3 503 190 2 859 137 Attributable to non-controlling interest 9 551 9 682 2.2 Selected financial ratios 2012 2011 Total assets (PLN '000) 150 949 830 146 590 106 Profit (loss) before income tax (PLN '000) 3 680 261 3 592 946 Profit (loss) for the period (PLN '000) 2 965 253 2 909 096 Shareholders' equity (PLN '000)* 20 493 529 18 447 834 Return on equity 14.47% 15.77% Capital adequacy ratio 18.98% 16.98% Receivables to total assets 65.67% 67.13% Income generating assets to total assets 96.71% 96.78% Interest bearing liabilities to total liabilities 82.57% 82.96% * excluding current-year net profit 10
3 Detailed report 3.1 Accounting principles The Parent Company maintains current documentation describing the accounting principles applied by the Group and adopted by the Management Board of the Parent Company. The accounting principles are described in the notes to the consolidated financial statements to the extent required by International Financial Reporting Standards as adopted by the European Union. Entities included in the Group apply common accounting principles consistent with the accounting principles applied by the Parent Company. The financial statements of the entities included in the consolidated financial statements were prepared at the end of the same reporting period as the financial statements of the Parent Company. 3.2 Basis of preparation of the consolidated financial statements The consolidated financial statements of Bank Polska Kasa Opieki Spółka Akcyjna Group were prepared in accordance with International Financial Reporting Standards as adopted by the European Union and with other applicable regulations. The consolidated financial statements were prepared on the basis of the consolidation documentation. 3.3 Method of consolidation The method of consolidation is described in note 4.3 of the notes to the consolidated financial statements. 3.4 Goodwill arising on consolidation The method of calculating goodwill arising on consolidation is described in notes 4.8 and 33 of the notes to the consolidated financial statements. 3.5 Consolidation of equity and calculation of non- controlling interest The share capital of the Group is equal to the share capital of the Parent Company. Other equity items of the Group are determined by adding the equity balances of subsidiaries included in the consolidated financial statements in the proportion reflecting the Parent Company s share in the subsidiaries equity as at the end of the reporting period to the corresponding positions of the equity of the Parent Company. 11
Only equity of subsidiaries arising after the Parent Company obtained control of the subsidiary is included in the equity of the Group. Non-controlling interests in subsidiaries included in the consolidated financial statements were determined based on the non- controlling interests share in the subsidiaries equity as at the end of the reporting period. 3.6 Consolidation eliminations Intercompany balances within the Group were eliminated on consolidation. Sales between entities and other intercompany operating revenues and expenses and financial revenues and expenses were eliminated on consolidation. The consolidation eliminations were based on the accounting records of Bank Polska Kasa Opieki Spółka Akcyjna (or subsidiary entities) and agreed with information received from the subsidiaries. 3.7 Compliance with banking regulations Based on our audit we have not identified significant incompliance by Bank Pekao S.A. with the banking prudential regulatory norms pertaining among other to exposure concentration, obligatory reserve and capital adequacy. 3.8 Notes to the consolidated financial statements All information included in the notes to the consolidated financial statements, comprising of a summary of significant accounting policies and other explanatory information, is, in all material respects, presented correctly and completely. The notes to the consolidated financial statements should be read in conjunction with the consolidated financial statements. 12
3.9 Report of the Management Board of the Parent Company on the Group s activities The report of the Management Board of the Parent Company on the Group s activities includes, in all material respects, the information required by Art. 49 of the Accounting Act and by the Decree of the Ministry of Finance dated 19 February 2009 on current and periodic information provided by issuers of securities and the conditions for recognition as equivalent information required by the law of a non-member State (Official Journal from 2009, No 33, item 259 with amendments) and the information is consistent with the consolidated financial statements. On behalf of odpowiedzialnością sp.k. registration number 3546 ul. Chłodna 51, 00-867 Warsaw Signed on the Polish original Signed on the Polish original... Bogdan Dębicki Key Certified Auditor Registration No. 796 Management Board member of KPMG Audyt Sp. z o.o., general partner of odpowiedzialnością sp.k.... Stacy Ligas Limited Liability Partner with power of attorney 14 March 2013 13